sigma off the bourse, page-7

Sigma rests ahead of downgrade of condition DAVID SYMONS
March 2, 2010 .



SIGMA Pharmaceuticals is keeping the market waiting for an update on earnings for the year to January. The healthcare company had previously provided guidance for a slight increase in annual profit but expectations are now more subdued, with the company suspended from trade after requesting a trading halt to allow an earnings update to be finalised on Thursday.

When the downgrade comes it is expected to be the last that chief executive Elmo De Alwis unveils at Sigma. De Alwis presided over two downgrades in 2007, and this time investors (fresh from supporting a $297 million capital raising at $1.02 a share in September) are agitating for change at the top.

While the company has provided few clues in advance of the formal announcement, industry sources were yesterday tipping that the most immediate basis for the company's problems was the practice of forward selling - encouraging customers to place large orders immediately before Sigma's year end to help it hit its numbers.

Sector analysts know that Sigma has been forward selling for years, but the speculation is that this year a major customer refused to place the order that Sigma was looking for, with a substantial impact on the company's profitability.

While this is a plausible cause of earnings weakness, it does not explain the timing of the downgrade, or the need for Sigma to spend several days suspended from trade. A poor January sales result should have become clear within a few days of the company's year end, and made updated earnings guidance available by mid-February.

Sigma shares last traded at 90.